The Networked Nonprofit

Management wisdom says that nonprofits must be large and in charge to do the most good. But some of the world’s most successful organizations instead stay small, sharing their load with like-minded, long-term partners. The success of these networked nonprofits suggests that organizations should focus less on growing themselves and more on cultivating their networks.

Habitat for Humanity International
is a classic nonprofit success
story. The organization now includes
2,100 affiliates operating in 100 countries.
It boasts a vast portfolio of corporate
sponsors such as Lowe’s, Bank
of America, and Cisco. And it has built
200,000 houses that shelter more than
1 million people.

Yet according to the United Nations,
some 100 million people worldwide
remain homeless, and nearly 3 billion
live in poverty. If Habitat for Humanity
continues to build homes at its current
rate, the organization will fall far short
of its goal of eliminating homelessness
and what it calls “poverty housing”
– that is, the substandard, overcrowded,
and even dangerous conditions in
which many poor people live.

But one country program, Habitat for Humanity Egypt (HFHE), is
covering more ground in pursuit of
its mission. Whereas a typical Habitat
for Humanity country program produces
around 200 houses each year,
HFHE has on average built some 1,000
houses annually, for a total of more
than 8,000 houses in just eight years. At
the same time, HFHE has transformed
the communities in which it works by
collaborating with local organizations
to address the root causes of poverty
and homelessness. Indeed, HFHE is
on track to realizing its vision: “to serve
10 percent of the 20 million Egyptians
living in poverty and to develop the local
capacity to serve the remaining 90 percent
in need over the next 25 years.”

Our research reveals the secret of
HFHE’s success: It has replaced the traditional
nonprofit focus on internal activities
such as fundraising, staff recruitment,
and program development with
an external focus on building its network.
Taking stock of his organization’s
resources – capital and housing program
expertise – HFHE’s national director,
Yousry Makar, asked himself what
other resources his organization needed
to reduce homelessness in Egypt. He concluded that it needed
the on-the-ground knowledge and deep relationships that community-
based organizations already had. This led him to develop
the loose network of local nonprofits that has made HFHE such
a success.

We have studied several organizations that exemplify this
network approach. By mobilizing resources outside their
immediate control, networked nonprofits achieve their missions
far more efficiently, effectively, and sustainably than
they could have by working alone. Many traditional nonprofits
form short-term partnerships with superficially similar
organizations to execute a single program, exchange a few
resources, or attract funding. In contrast, networked nonprofits
forge long-term partnerships with trusted peers to tackle their
missions on multiple fronts. And unlike traditional nonprofit
leaders who think of their organizations as hubs and their partners
as spokes, networked nonprofit leaders think of their organizations
as nodes within a broad constellation that revolves
around shared missions and values.

Most social issues dwarf even the most well-resourced,
well-managed nonprofit. And so it is wrongheaded for nonprofit
leaders simply to build their organizations. Instead, they must
build capacity outside of their organizations. This requires
them to focus on their mission, not their organization; on trust,
not control; and on being a node, not a hub.

Network for a Change

Nonprofits that understand how to network range across both
nations and issues. One organization we have studied, for
instance, is the Guide Dogs for the Blind Association (GDBA),
a United Kingdom-based nonprofit that is the world’s largest
breeder and trainer of guide dogs. When Geraldine Peacock
became its CEO in 1997, GDBA was providing guide dogs to
only 5,000 clients. Yet the organization’s own research suggested
that more than 200,000 people in the United Kingdom
needed mobility services, which include providing guide dogs
and training clients to use canes. At the same time, the organization
was losing millions of pounds sterling per year operating
hotels and a travel agency for the visually impaired.

Peacock decided to scale back her organization and focus only
on its primary area of expertise: mobility training. But her
clients still valued GDBA’s hotel and holiday operations. Rather
than abandoning these enterprises altogether, Peacock offered
to partner with other organizations that serve the visually
impaired – GDBA’s former competitors. GDBA then not only
handed over the management and control of the hotel and travel
programs to its partners but also invested an additional £8 million
to improve the programs’ quality and to ensure their sustainability.
GDBA’s partners only had to meet jointly determined
performance benchmarks.

GDBA also partnered with local governments to improve
the quantity and quality of mobility services. In the United Kingdom,
local governments are legally responsible for providing
mobility training, independent living skills, and communication
skills to the visually impaired. Yet government budget constraints
leave many of these services underfunded. And so
GDBA offered to fund local governments’ mobility training initiatives.
The governments could use the funds to subcontract
with either GDBA or another nonprofit. When governments
chose the latter, GDBA offered to give technical support to its
peers. In exchange for the funding, the government agencies reallocated
the money they saved to other services for the visually
impaired.

Finally, Peacock created an independent umbrella organization,
Vision 2020 UK. The organization helps various service
providers coordinate their efforts and share the costs of operations
(such as payroll). It also brings together eye care service
users and providers to produce a unified plan for action on all
issues relating to vision. Within five years of creating these
partnerships, GDBA more than doubled the number of clients
to whom it provided mobility services without scaling up its own
operations. Instead, it worked through other nonprofits and the
government to achieve its mission. After witnessing GDBA’s success,
the U.K. government established a £125 million fund in 2002
to invest in the types of nonprofit networks that GDBA and its
partners had pioneered.

Some microfinanciers have also learned the power of nonprofit
networks. Women’s World Banking (WWB) is one of
them. Founded in 1976, WWB seeks to expand the economic
assets, participation, and power of low-income women.

When Nancy Barry assumed leadership of WWB in 1990,
the organization reached approximately 50,000 clients and lent
approximately $25 million through its network of affiliates. To
deliver on its mission, Barry decided to grow the WWB network
to include more independent microfinance institutions – such
as ASA in Bangladesh – and banks – such as Shorebank in the
United States. Today, the WWB network includes 53 microfinance
institutions and banks in 30 countries. By 2003, WWB’s
expanded network gave 18 million people worldwide $8.5 billion
in direct credit services. This growth translated into a more
than 350-fold increase in the number of clients whom WWB
served. At the same time, WWB’s staff barely grew – from 16
employees in 1993 to 50 employees in 2003. Its budget likewise
did not keep pace with its impact: from $3 million in 1993 to $10
million in 2003.

WWB gives its network members the services for which scale
improves efficiency, such as technical and financial services,
market research, and loan guarantees. It teaches affiliates best
practices. And it advocates better microfinance policies. Yet
most of the network’s power lies in the support that its members
give to each other. WWB network members share product
and process innovations, provide technical services, evaluate
each other, and hold each other accountable for results. “To
create real networks, you have to believe that the center of an
operation does not have a monopoly on truth,” says Barry.
“You need to trust the people, trust the process.”1

Mission, Not Organization

Although HFHE, GDBA, and WWB are building different
types of networks to achieve disparate missions, they share a
common mind-set. First, they put their missions rather than their
organizations at the center of their operations. By sharing the
pursuit of their mission, these organizations forsake many
organizational benefits, such as control over program implementation,
funding, and recognition. At the same time, however,
they have far more impact than they could ever have had
on their own.

For example, when Makar began to lead Habitat’s efforts in
Egypt, he first identified nongovernmental organizations
(NGOs) that were already tackling issues related to poverty, such
as economic development, education, and health care. “We
have an Egyptian proverb that I use, which is that ‘the basket
that has two handles should be carried by two people,’” says
Makar. “So I put this proverb in my mind and this is how I began
to think to address this problem [of housing in Egypt].”

He then partnered with these organizations to develop
housing programs, keeping in mind that alleviating poverty
would require more than housing. Indeed, Habitat for Humanity
International has built homes in communities that deteriorated
into slums because no one had confronted the root causes
of poverty.

Rather than impose his ideas upon the network, Makar
supports HFHE’s partners to the point when they become self-sufficient.
Some of these alliance partners now attract their own
funding, operate their own housing programs, and even disseminate
their expertise without HFHE’s involvement. When
these partners and HFHE agree to part ways, HFHE can turn
its attention to new communities with unmet needs.

HFHE freely shares recognition for its successes. At an event
commemorating the building of HFHE’s 6,000th house, Makar
was invited to say a few words about HFHE’s achievements. In
his remarks, Makar said: “It’s not Habitat. The community is
doing it. We just provide support.” He then invited his network
partners to join him on stage.

GDBA likewise gives up control, funding, and recognition
to support competitor NGOs and local governments that are
dedicated to the same mission. Peacock readily acknowledges
that GDBA cannot single-handedly serve the mobility needs of
the entire visually impaired population of the United Kingdom,
even though the organization is the second largest charity
in this domain. In an interview she said: “It was less important
which organization was providing services, or in turn
which organization got credit or recognition for doing so, be it
the government, or competing nonprofits, as long as services
were being provided to the visually impaired at a high quality
on a sustainable basis. … It’s really about working smarter and
thinking laterally.”

Trust, Not Control

In many partnerships, nonprofits feel they must exert control
to ensure quality. But when networked nonprofits share the same
values, they do not have to try to manage for every contingency.
Although partners may still opt to have formal contracts, they
more often use them to define roles and responsibilities rather
than to enforce rules. For them, trust governs the network.

Before HFHE accepts a new partner, for instance, it examines
not only the potential partner’s track record in community
development, but also its alignment with HFHE’s core values:
integrity (following through on commitments), diversity (no discrimination
on the basis of color, religion, gender, nationality,
or disability), and equity (serving those in greatest need). To
assess the potential partner on these dimensions, HFHE conducts
extensive interviews with local leaders, beneficiaries, and
NGOs.

The organization also involves the potential partner in volunteer
activities. Because HFHE spends considerable time and
resources selecting partners, it does not need to rely on traditional
top-down approaches to control them. Instead, the nonprofit
treats its partners as trusted equals who play a central role
in designing and executing the housing programs that best
serve their community’s needs.

Barry likewise works hard to build a shared vision and culture
throughout her organization’s network. For example,
WWB facilitated a series of meetings with its partners to define
their shared values. According to Barry, these values included
a belief in poor women as entrepreneurs, clients, and change
agents; in business approaches to economic and social changes;
and in the power of self-determined organizations bound by
mutual accountability for results, rather than in donor-driven
approaches or top-down controls. “We believe that the practitioners
are the experts,” she says.2 Thus, unlike its counterparts
that advocate for a specific method of microfinance,
WWB relies on its partners’ values to ensure adherence to the
network’s shared vision while encouraging network members
to tailor their methods to local contexts and client needs.

Networked nonprofits cannot take values alignment among
partners for granted. They must commit time and resources at
the outset to assess whether there is sufficient common ground
on which to build a network. They must then invest in strengthening
the shared values and monitoring adherence to them.
Above all else, all network members must demonstrate their
ongoing commitment to the social impact of the network
rather than to their own organizational interests. Despite the
cost of these investments, networked nonprofits are often far
more productive because they don’t have to rely on formal
control mechanisms. Instead, their partners’ internal motivation
and commitment drive them to work hard for the shared
vision of the network.

Node, Not Hub

Networked nonprofits like HFHE, WWB, and GDBA share a
third trait: They see themselves as nodes within a constellation
of equal, interconnected partners, rather than as hubs at the center
of their nonprofit universes. Because of the unrestricted and
frequent communication between their different nodes, networked
nonprofits are better positioned to develop more holistic,
coordinated, and realistic solutions to social issues than are
traditional nonprofit hubs.

For example, although HFHE’s network partners receive 95
percent of their funding from HFHE, Makar knows that his organization
is equally dependent on these partners to bring superior
knowledge of the local communities and credibility in
them. As a result, HFHE encourages its partners to tailor their
housing grants to community needs and then spreads the resulting
innovations. In one case, a partner asked HFHE if it could
use its overhead contribution (5 percent of its capital) to build
homes for families that were too poor to qualify for HFHE loans.
HFHE agreed, and then promptly offered the partner’s innovation
to all of the other nodes in its network.

WWB similarly relies on network members’ knowledge
and expertise to amplify its impact. According to WWB founder
Michaela Walsh, “Instead of running a global institution from
on high, we wanted decisions made from the bottom up,
through consensus building.”3 WWB staff help members by
coordinating technical and financial products and services and
offering training. Yet WWB depends on network members
themselves to help each other achieve high performance. In 1998,
a core group of network members worked together to establish
minimum performance standards. By treating network
members as equals and valued peers, WWB was able to establish
demanding performance standards that were far more
credible and effective than if they had been pushed down from
WWB headquarters.

Change for the Better

According to our research, nonprofits that pursue their missions
through networks of long-term, trust-based partnerships consistently
achieve more sustainable mission impact with fewer
resources than do monolithic organizations that try to do everything
by themselves. Unfortunately, however, many practices
in the nonprofit sector inhibit the creation of such networks.

Nonprofit leaders often view organizational growth and revenue
increases – rather than impact – as their primary metrics
of success. As in the corporate sector, the nonprofit sector considers
growth of some form – whether scaling up existing programs,
expanding to new locations, raising more money, or proliferating
new programs – to be a sign of vitality and impact.
Organizations whose budgets, staff, and programs are growing
in direct response to an urgent need are often viewed as the most
successful.

Nonprofit boards can also prove to be an impediment to network
building. Boards are charged with overseeing the accountability
of the nonprofit. This mandate often translates into an
internal, organization-level focus on activities and performance,
such as costs and revenues, number of new programs, number
of clients served, or brand building and fundraising. Boards do
not have strict, clear standards for measuring progress toward
their mission.

Donors likewise hinder the broader use of networks in the
nonprofit sector. Although many funders today encourage collaboration
among grantees, they often do so in a top-down manner.
They fail to realize that relationships cannot be forced with
the blunt tool of funding. Furthermore, donors have historically
preferred to give restricted funding to specific programs rather
than unrestricted funding to the organization. Dictating what
and how programs should be delivered severely limits the creativity
and flexibility that experts need to build powerful networks.

Even high-engagement philanthropy, with its longer-term
funding, organizational capacity investments, and strategic
coaching, does not go far enough: Its emphases on organizational
performance, accountability, and going to scale often preclude
leveraging resources beyond organizational boundaries. Instead,
they drive nonprofits to concentrate on outcompeting their peers
and building their own organizations’ brands so that they can
secure funding in competitive philanthropic capital markets.
Even organizations that can afford to go it alone should explore
whether working through a network can generate greater
impact with fewer resources.

To harness the tremendous potential of networks, all nonprofit
leaders – presidents and CEOs, board members, and funders
– must let go of conventional wisdom and shift their focus
from organization-level goals to network-level impacts. Nonprofit
leaders should put the pursuit of their missions – not the growth
of their organizations – back at the center of all of their organizations’
activities. They should identify their organizations’
unique competencies and actively seek partnerships with other
organizations that will help them serve their missions more
efficiently and effectively. They should look to both complementary
and competing organizations as potential partners.

Board members must grant nonprofit leaders the autonomy
to develop innovative approaches to achieving their missions in
the long term, even if it means sacrificing short-term organization-
level achievements. The board should also invest organizational
resources in network building, enable formal relationships
with external parties, and value impacts over outputs.

Funders too can nurture nonprofit networks. They should
select grantees that embody the vision, values, and leadership
capabilities needed to create and work through networks. By
selecting for these values and providing unrestricted, long-term
support, funders can help their grantees build and develop
strategic networks that have the greatest impact. Because no single
organization can claim the achievements of the network, funders
must also fundamentally rethink their accountability systems
and remain realistic about the timelines required for
achieving network-level impacts.

More With Less

Networked nonprofits are some of the most effective nonprofits
in the world. They are different from traditional nonprofits
in that they cast their gazes externally rather than internally.
They put their mission first and their organization second.
They govern through trust rather than control. And they cooperate
as equal nodes in a constellation of actors rather than relying
on a central hub to command with top-down tactics.

By mobilizing vast external resources, networked nonprofits
can focus on their own expertise. At the same time, these external
resources enhance the value and influence of each organization’s
expertise. They help each network partner respond to
local needs and become self-sustaining. And they allow networked
nonprofits to develop holistic solutions at the scale of
the problems they seek to address.

Although the social problems that nonprofits are tackling
are growing in both magnitude and complexity, funding is failing
to keep pace. Networks do not require more resources, but
rather a better use of existing resources. And so networked nonprofits
are uniquely poised to face the perennial challenge of the
nonprofit sector: achieving lofty missions with decidedly humble
means.

Notes

1 http://www.alumni.hbs.edu/awards/2005/barry.html.2 James Austin and Susan Harmeling, &#8220;Women&#8217;s World Banking: Catalytic Change Through Networks,&#8221; Harvard Business School (1999).3 Ibid.

Jane Wei-Skillern is an assistant professor of business administration
in the General Management Unit and Social Enterprise Group at
Harvard Business School. In addition to conducting research on networked
nonprofits, she teaches in the field of social entrepreneurship.

Sonia Marciano is a clinical associate professor of management
and organizations at New York University’s Stern School of Business.
Before joining Stern, Marciano taught strategy at Columbia Business
School and was a senior lecturer at Harvard University.